Is Landlord Insurance More Expensive than Homeowners Insurance?

Boston has one of the most competitive rental property markets in the country. The city has consistently recorded low vacancy rates in terms of commercial and residential spaces for rent. A significant majority of companies that are renting would be involved in healthcare, high-tech, and education sectors.

The rental property market is colossal. According to government data, in 2017, there were 42 million household rentals in the U.S. In terms of ranking, Boston is right near the top with nearly 392,000 renters. The figure translated to over 63% of the city’s total population. The Massachusetts cities with a high ratio of renters included Lawrence, Worcester, Springfield, Cambridge, Lowell, and Fall River.

Nevertheless, the rental market is tight, with a vacancy rate of 3.87%, which was significantly lower compared to the country’s mean value at 6.18%.

Understandably, investors want to make a windfall by participating in this competitive landscape. And when you decide to join the fray, do not forget to inquire from your insurer on landlord insurance Massachusetts.

Even if you are a homeowner who decided to rent out your unused space, it is recommended that you purchase landlord insurance, which cloaks your property with a wider mantle of protection compared to the standard homeowner’s insurance. The coverage options are not as diverse; however, you have the big ones, such as fire, flood, wind, ice, and theft.

How Much Should I Pay in Landlord Insurance?

The premium for landlord insurance in Massachusetts would be 15-20% higher compared to the homeowner’s insurance. You can easily compute this using your own insurance policy to grasp better how much it would cost when you shift policies.

For 2019, the average cost of homeowners insurance was $1083 per year, according to ValuePenguin. At the top ceiling of 20%, your estimated landlord insurance would be $1,300.

The costly premium is understandable, considering that the properties involved are larger and more expensive. Only a small portion of these are residential spaces that allow renters. However, other factors change the computation of your premium. For example, if you take in short-term rentals, insurers classify this as high-risk, which means a higher premium.

Even the type of rental arrangement will affect landlord insurance in Massachusetts. For example, a condo would have different coverage to a single-family home. The same goes for a two-family home or a four-unit house, and whether or not you have seasonal rentals, full-time rentals, or short-term rentals.

Computation for retail and commercial space insurance would be different compared to an industrial space. Lastly, the deductible amount will also have an impact on the insurance cost. As in most policies, the lower the deductible, the higher would be the annual premium. These are why you could not easily find real figures out there when you search landlord insurance costs.

Not Enough Protection

Landlord insurance is created for a reason, and that is to address concerns specific to the industry. The common mistake of some first-time landlords is to rely on their homeowner’s insurance when their properties have already shifted focus. For all intents and purposes, their old policy is no longer sufficient to cover their unique needs. They will find out the hard way in the event of fire, storm, ice damage, or when a tenant figures into an accident that demands medical expenses.

Do not make this rookie mistake when you want to become a landlord. Inquire about getting landlord insurance first before you even start advertising your property.